Deck 2: Industry Analysis

Question 1

In which of these three sectors of the economy - manufacturing, services, transportation - is the effect of business strategy on performance the smallest?

A) manufacturing
B) services
C) transportation
D) all the same

Answer 1

transportation

Question 2

Cooperation between a firm and its buyers can lower firm costs and also, lower buyer value.

Answer 2

False

Question 3

Which of the following conditions is not necessary for perfect competition?

A) there are many competitors
B) exit is relatively costless
C) all firms have the same cost structure
D) all firms are the same age

Answer 3

all firms are the same age

Question 4

How would a firm reduce the power of one of its buyers?

A) Decrease the percentage of product sold to it.
B) Reduce its strategic importance to the firm.
C) Increase the strategic importance of the firm to it.
D) All of the above.

Question 5

Which of the following best describes the determinants of industry concentration?

A) the ratio of market size to the minimum set up costs required to compete
B) the level of incumbent sunk cost investment in activities that increase value to the customer
Cboth the ratio of market size to the minimum set up costs required to compete and the level of
C) incumbent sunk cost investment in activities that increase value to the customer
Dneither the ratio of market size to the minimum set up costs required to compete nor the level of
D) incumbent sunk cost investment in activities that increase value to the customer

Question 6

Which of the following represents a good example of complementary products?

A) tablets and app stores
B) airlines and hotels
C) snow skis and snowboards
D) weak antitrust regulation and lawyers

Question 7

Which of the following helps to explain why stronger industry concentration is often associated with a higher level of profitability?

A) large firms tend to be less efficient
B) collusion activity among large firms
C) large firms have more market power
D) all of the above

Question 8

According to Ghemawat, which of the following are key conditions for tacit collusion?

A) strategic complementarity
B) repeated interaction
C) mutual familiarity
D) all of the above

Question 9

Which of the following is a common condition for the failure of a cartel?

A) an inability to penalize cheating
B) an inability to prevent entry into the industry
C) bargaining problems among cartel members
D) all of the above

Question 10

Price competition within an oligopoly of firms with identical products drives profits to:

A) about 15% return on equity
B) zero
C) about 5 percent return on equity
D) about 10% return on equity

Question 11

Building barriers to entry is usually costless.

Question 12

The baseline condition for buyer power is the availability of comparable, competing products.

Question 13

Suppliers set the baseline for a firm's costs.

Question 14

The bargaining power of a supplier increases as it sells a higher percentage of its goods to a firm.

Question 15

Strong substitutes can set a limit on the prices firms may charge for their products or services.

Question 16

Technological similarity is necessary to distinguish an industry from substitutes.

Question 17

Powerful substitutes lower the value required to compete.

Question 18

Reducing prices is one way to increase the barriers to entry.

Question 19

Cooperation between the firm and its suppliers can lower supplier costs with a comparable drop in value.

Question 20

What is the difference between a market segment and an industry?

Question 21

How do industry forces affect Value minus Cost? What does an analysis that only considers the competition ignore?

Question 22

How can complementary products or services increase the profitability in an industry?

Question 23

Draw the value net for the Tablet industry.